Europe’s wind industry catches up with fossil fuels — report

Source: By Miranda Willson, E&E News reporter • Posted: Sunday, August 2, 2020

Offshore wind in some European countries is now cost competitive with fossil fuels and may even result in negative subsidies that lower consumers’ energy bills, a new study has found.

Offshore wind projects approved in the United Kingdom in 2019 could be the first in the country to return money to the general public because of their low costs, said the study, which was published Monday in the journal Nature. The development follows in the footsteps of Germany and the Netherlands, which have already approved negative-subsidy offshore wind farms as well, according to the study.

“It is possible that future wind farm developers will aim to build ‘merchant’ offshore wind farms without financial support, completely free of government support,” the study said.

A global leader in offshore wind development, the European Union’s offshore wind capacity topped 22,000 megawatts last year, according to the wind industry group WindEurope. While the U.S. trails the E.U. in offshore wind installments, this study suggests that offshore wind could pay off in the U.S. or elsewhere with the right policies in place, said Malte Jansen, a research associate at Imperial College London’s Centre for Environmental Policy and the study’s lead author.

“There is no reason why it couldn’t happen [in the U.S.] if you get the strong policy support, if you get the supply chains in place, and if the finance people get a feel for it, go out and see it and trust it,” he said.

Jansen and other researchers at Imperial College London, the Technical University of Denmark and Germany’s Brandenburg University of Technology analyzed the prices of winning bids at offshore wind auctions in the U.K., the Netherlands, Germany, Denmark and Belgium. They found that the price paid for these projects fell by approximately 11.9% each year from 2015 to 2019.

In 2019, the average bidding price was about €51 per megawatt-hour, which is comparable to the lower-end price of fossil fuel generation in the five countries assessed, the study said.

“It’s come around much quicker than we thought it would’ve happened,” Jansen said.

The decline in costs is in some ways comparable to trends in solar cell technologies, he said. Once thought to be prohibitively expensive in many places without subsidies, solar electricity is now cheaper than electricity from fossil fuels in a growing number of U.S. states.

Offshore wind prices in Europe have been falling for several reasons, according to Jansen. The industry’s supply chain is highly stable and integrated across northern Europe, and wind turbines have grown in size, making them more efficient to build, he said.

Some of the projects also benefit from favorable site conditions. The Dogger Bank Wind Farm under construction off the coast of northern England sits on a relatively shallow bank in the North Sea, which made a fixed-foundation turbine model possible despite the project’s distance from the shore, Jansen said.

These conditions and phenomena, however, don’t necessarily have to be unique to Europe, according to Jansen and renewable energy advocates.

“As in the U.K., the [U.S.] offshore wind sector has enormous potential to provide American businesses and consumers with abundant and affordable pollution-free power,” Gregory Wetstone, president and CEO of the American Council on Renewable Energy, said in a statement. “With the right, forward-looking policies, America’s renewable energy sector can get the job done.”

There is only one offshore wind project online in the U.S. But projects under development are expected to increase offshore wind capacity from 30 megawatts to 2,000 MW by 2023, according to the Department of Energy.

This study sheds light on the economic benefits the U.S. could see as more projects are built, said Dennis Wamsted, energy analyst at the Institute for Energy Economics and Financial Analysis.

“The Europeans have done all the hard work and all the early investment and reduced the costs significantly — unbelievably — in the past 10 years,” Wamsted said. “Now, the U.S. has finally caught on.”

Cheap offshore wind could also boost other clean energy endeavors, notably green hydrogen projects, according to Jansen. Hydrogen is currently much cheaper to produce from fossil fuels than from renewable energy, but low-cost offshore wind power could make green hydrogen more competitive, he said.

“You could picture a world where wind turbines weren’t connected to the shore at all, but would use electrolysis to make hydrogen offshore,” Jansen said.